IN THE great, collective gasp that followed Greg Smith's blistering public resignation from Goldman Sachs, one reaction struck us as particularly prophetic.
It was a comment from James Gorman, CEO of Morgan Stanley.
Don't exploit Goldman's woes, he said a few days after Smith's letter ran in
the New York Times: "There but for the grace of God go us."
“Some took Gorman's remark as an admission of sorts – as if
he were saying, "Hey, Smith's criticisms could've been levelled at any
firm on Wall Street." Others took Gorman at his word when he explained
that he meant all companies are vulnerable to a disgruntled employee who joins
forces with a simpatico media outlet.
But we have a third interpretation that, to our minds, is
far scarier than either of those takes.
The Greg Smith case is a harsh reminder that most companies
don't face up to one of the most immutable rules of business: your soft culture
matters as much as your hard numbers, and if your company's culture is to mean
anything, you have to hang - publicly - those in your midst who would destroy
it.
It's a grim image, we know. But the fact is, creating a
healthy, high-integrity organisational culture is not puppies and rainbows. And
yet for some reason, too many leaders think a company's values can be relegated
to a five-minute conversation between HR and a new employee. Or they think
culture is about picking which words - do we "honour" our customers
or "respect" them? - to engrave on a plaque in the lobby. What
nonsense.
An organisation's culture is not about words at all. It's
about behaviour - and consequences.
It's about every single individual who manages people
knowing that his or her key role is that of chief values officer, with Sarbanes-Oxley-like
enforcement powers to match. It's about knowing that at every performance
review, employees are evaluated for both their numbers and their values, and
that only four outcomes exist.
First, for employees with good numbers and good values -
onward and upward.
For those with bad numbers and bad values - you're outta
here.
As for employees with good values but mediocre numbers - the
stance should be, we'll give you another chance with more coaching. Your
behaviour has earned you that.
Which leaves the type of employee who most commonly brings
companies to their knees: the one with the great numbers and crummy values. The
employee who doesn't share ideas with co-workers, who belittles customers
behind their backs, who kisses up to the hierarchy but kicks down his own
people - all while bringing in the numbers.
Ninety percent of the time, managers give these people a big
fat pass. "I know Jim can be a real jerk," they say, "but I just
need him until the economy stabilises." Or "Sure, Sally's attitude
upsets everyone, but I've spoken to her. I think she's going to come
around."
Actually, all Jim and Sally are doing is sending a big fat
message to every other employee: our company's values are a joke. And the only
antidote is to send Jim and Sally home, and not with the usual "They want
to spend more time with their families" BS out of the lawyers and HR, but
with the truth.
"Jim and Sally had great numbers," everyone needs
to be told, "but they didn't demonstrate the values of this company."
We guarantee such a public "display", to put it more politely, will
have more impact than a hundred "Our values really, really matter!"
speeches by the CEO.
The Smith case occurred on Wall Street, but to be clear,
we're talking about a problem that exists well beyond the canyons of lower
Manhattan. "Values drift" is pervasive in companies of every ilk,
from sea to shining sea.
Employees either don't know their organisation's values, or
they know that practising them is optional. Either way, the result is
vulnerability to attack, from inside and out, and rightly so.
Look, it's Management 101 to say that the best competitive
weapon a company can ever possess is a strong culture. But the devil is in the
details of execution.
And if you don't get it right, it's the devil to pay.
- Reuters
*Jack Welch was the CEO of General Electric for 21 years and is the founder of the Jack Welch Management Institute at Strayer University. Suzy Welch is an author, speaker and the former editor of the Harvard Business Review.